Treasury Gives Freddie Mac $13.8 Billion Infusion

And the company said there has been a "significant increase" in the number of borrowers struggling to pay their bills among people who received "prime" loans, not just the risky loans that started the mortgage crisis.

Freddie Mac said it was having trouble raising the long-term debt that finances its mortgage portfolios, limiting its ability to funnel money into the mortgage market to bring down rates.

But it made far less of that issue than Fannie Mae, which noted several times in its earnings report that it might not be able to fulfill the missions the government has assigned it or continue to meet its cash needs without additional help from the government.

The company said it expected to receive the government money by the end of the month. But the money would come with strings attached.

In exchange for access to the backstop, Freddie Mac gave the Treasury $1 billion in preferred stock and agreed to pay $100 million a year as a dividend. The value of the preferred stock will now grow to nearly $15 billion and the company will have to pay $1.5 billion a year as a dividend. And the dividend will only increase as the company receives more money from the government.

The size of the dividend might delay the company's return to profitability, Freddie Mac said.

If it continues to suffer losses, the company said, "we will be required to request additional funding from Treasury . . . which will further increase our ongoing dividend obligations and, therefore, extend the period of time until we might be able to return to profitability."

The company also has access to a line of credit from the Treasury, but it has not tapped that.

Some analysts say Freddie Mac might need more than the $100 billion the government has made available to it and might need a total of $40 billion by year's end.

Freddie Mac has other challenges. The company said yesterday that it is in a dispute with J.P. Morgan Chase because J.P. Morgan has refused to buy back bad mortgages sold to Freddie Mac by Washington Mutual. J.P. Morgan bought Washington Mutual earlier this fall. J.P. Morgan declined to comment.